The impact of climate change on economic growth based on time series evidence, 1969-2016

Abstract

BACKGROUND AND OBJECTIVES: Climate change is one of the existential threats of modern times, which deserves urgent attention by policymakers. The objective of this paper is to comprehend the impact of climate change on the Gambian economy both in the short and long-run. METHODS: This paper analyses time series data from 1969 to 2016. The study incorporated rainfall and temperature as proxies of climate change into the Cobb-Douglas production function. The Augmented Dickey-Fuller and the Phillips-Perron stationarity test for unit root found that the growth rate of rainfall is not statistically significant with the Mackinnon approximate p-value for z (t) =0.2306. The first lag is significant at 5% and 10% but has a negative coefficient in the first differential up to the fourth lag. In contrast, the growth rate of temperature is statistically significant with a p-value of 0.0196. FINDING: The findings revealed that human capital growth is not significantly related to economic growth in The Gambia. In the long-run, the growth rates of climate change variables are all statistically significant and associated with a negative impact on economic growth. For the short-run, the lag difference of rainfall against its own lag is statistically significant and has a positive impact on economic growth. The lag difference in the growth rate of the Gross Domestic Product is not statistically significantly related to the growth rate of rainfall. CONCLUSION: The Gambia is vulnerable to climate change shocks, consequently climate change will negatively impact economic growth resulting in high unemployment, low productivity, and high poverty rate.